Valentine’s Day: Rosy economics?

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Alright, I’ll confess: I am often accused of being a miser on St. Valentine’s Day. This is because I usually buy three roses for my Italian wife. Never a dozen like everyone else. While devoted to the Trinity, accepting the number 3 as a true sign of God’s perfect unity and love, and while I get a pass from my religious-minded and economically sensitive spouse, my wee rose acquisition is not just a test of love but it is also a test of free market economics.

Allow me to explain.

The real problem at hand, for a discerning consumer like myself, is linked to prices. In Rome where I live and anywhere else on Valentine’s Day – the price of roses skyrockets dramatically in just 24 hours. If yesterday I had bought a rose, it would have cost just 2-3 euro each. Today – the exact same rose in the exact same shop – costs more. Three to four times more. Add in the recently announced Italian recession and our reduced purchasing power due constantly rising inflation, and you begin to understand my not so “rosy” economic logic at the florist.

What’s worse is that if after work I race to the florist, competing with all the other hopelessly disorganized Italian lovers at 6:00 p.m., and if I find emptied out flower barrels with an 8-10 euro price tag for the worst-looking remaining specimens, then I am even less incentivized to purchase 12 long-stems.

And so I usually just decide that the price is not worth it for 12 and I settle for 3. That’s free consumer choice, an important right to exercise in free market transactions.

Sometimes, when the roses are in such bad shape, I try to bargain down to the original sales price. If unsuccessful, I abandon the rose acquisition altogether and settle for a potted flowered plant, which my understanding and virtuous spouse actually prefers because she says a) they last longer, b) look better, and c) and allows us to spend our discretionary income on more valued consumables – such as a quiet dinner away from our two war-mongering teenagers.

That’s consumer choice, once again, while weighing in aesthetics with some potential opportunity costs.

Hence, Valentine’s Day always teaches me lessons in market economics, especially regarding price signals, consumer preferences, supply and demand theory, and relevant cost factors. This is so even while many of us “blame” today’s sky-high rose prices on the “greedy” florists who “take advantage” of feeble romantic men who fear not fully impressing their female admirers.

The real truth is that high rose prices act as veritable signals of marketplace conditions on February 14. In this particular case, the high cost of roses is not at all a sign of our neighborhood florist’s temporarily increased avarice, but rather that there is actually a very high demand for these flowers while in relatively short supply to abundant consumers coupled with high production costs. Roses, we learn, are a rarity in winter and symbolize the very rarity of our true love. And the high price tag is well worth it, we think.

Reading a Mises Institute article by Don Matthews who analyzed such “rose market economics” during one February in the United States, and looking at my own barren Italian rose bushes, I am convinced that rose production for Valentines Day, is actually a difficult, if not a miraculous process. Matthews writes:

Most of the roses on the market are grown in greenhouses. According to Roses Incorporated, a rose growers trade association, commercial rose growers in the U.S. operate nearly 900 acres of greenhouse area at a capital investment of about $1 million per acre. In summer, a greenhouse can grow a rose in about 30 days. But in the cold, dark months of December, January, and February it takes between 50 and 70 days to grow a rose. Keeping the Valentine’s Day rose crop warm while it grows requires a lot of heat. So much that the winter heating bills of large, California greenhouses typically exceed $200,000 a month.

Matthews’s same article instructs his readers that getting the roses to market is a real challenge with associated costs and risks. It not only requires the building of expensive greenhouse structures, more land, but also accelerated growth practices that include boosted soil nutrients, mold prevention sprays in humid conditions, additional artificial lighting and extra heating to meet the increased demand for sales in a very short time frame. Ergo, massive additional expenses for guaranteed fast delivery of the agricultural product on February 14. Once you consider the specially coordinated logistics of airfreight and courier services which are pressed for on-time delivery, you appreciate the overall markup on today’s roses. As Matthews tells us,

The distribution logistics are no less daunting. The timing must be perfect. Growers and wholesalers must get the rose crop to 26,000 florists and 23,000 [U.S.] supermarkets within five days of Valentine’s Day. Any sooner is too early, for the roses may perish. Any later is too late. Not many people buy roses the day after Valentine’s Day.

The bottom line is that high rose price signals are real signs of the costs of production, overall supply, and overall demand of a relatively rare flower produced in the month of February.

Finally, it is just that the suppliers and retailers of roses make a profit. If not, it is not worth their huge efforts and risks to meet the increased holiday demand. “The gigantic demand for roses creates a gigantic demand for the land, labor and capital that are used to grow roses…Producers can only pay these costs so long as consumers are willing to pay the price,” says Matthews.

But neither the suppliers or the retailers force or trick us to buy 1 or 12 roses. It is not a collectivized rule to purchase them, as if commanded to do so by the Valentine’s Day marketing gods. “Consumers are sovereign on Valentine’s Day,” concludes Matthews, “just as they are on every other day” whether their economic circumstances are favorable or not.